Pacific forecast sees distant recovery

Thursday

Jun 25, 2009 at 12:01 AMJul 21, 2009 at 12:22 PM

STOCKTON - Two years of recession will cost California more than 1 million jobs before the bleeding stops sometime near the end of the year, the University of the Pacific's Business Forecasting Center said Wednesday.

Reed Fujii

STOCKTON - Two years of recession will cost California more than 1 million jobs before the bleeding stops sometime near the end of the year, the University of the Pacific's Business Forecasting Center said Wednesday.

That prediction and others are similar to the outlook painted in the center's last quarterly report, as the state remains on the same general economic trajectory, only now seen as slightly weaker, forecast director Jeff Michael said.

Recent reports of job losses greater than expected led to the more negative outlook.

"We're still on track to bottom out this fall," Michael said.

The state's unemployment rate, now at 11.5 percent, should peak at 12.3 percent early next year.

But beyond that, it will take at least three years before the state's economy fully recovers.

"This is a deep, deep hole," Michael said. "We have a lot of ground to recover."

In San Joaquin County, severely affected by the housing and construction downturn, job losses are expected to continue into 2010 until its recovery begins in the third quarter. At that point, employment opportunities are expected to appear in education and health services; leisure and hospitality; trade, transportation and utilities; and financial activities.

In the California & Metro Forecast released Wednesday, Michael considers at some length whether the San Joaquin Valley qualifies as an economic disaster area, a designation being sought by some political leaders in order to qualify for federal aid.

"I've mixed feelings about it," he said.

While there could be some benefits, such as short-term aid and increased awareness of a region's challenges, in the long run, such a label could be misleading or discourage investment.

"Undoubtedly, the San Joaquin Valley is a housing disaster area with the nation's highest foreclosure rates and largest declines in real estate values," the forecast says. The Valley also has some of the nation's highest unemployment and poverty rates.

But the challenges facing the Valley are different than those seen in other economically distressed areas and, in many cases, the opportunities are greater.

The San Joaquin Valley is not Appalachia, which has seen no growth in decades and has a stagnant, aging population. And while the foreclosure crisis has caused widespread family dislocation and hardship, it is unlike the natural disaster Hurricane Katrina brought to New Orleans in rendering entire neighborhoods uninhabitable.

Unlike Detroit - which is in the midst of the permanent, wrenching loss of its high-paying auto industry - the Valley's downturn is largely cyclical.

"The biggest driver on unemployment in the region has been construction," Michael said. "This is the biggest cyclical downturn that we've seen in a cyclical industry, but it will come back."

While today's reality may indeed be an economic disaster, the forecast also says the Valley is an area of opportunity "with enormous potential for positive growth."

"The California location, young work force, growing cultural amenities and business services, and relatively low cost of living create opportunities for entrepreneurship and investment," the report says.